Chinese economy on track to register a mild recovery
Updated: 2013-01-09 07:00
(HK Edition)
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I have repeatedly pointed out that exports have become a far less effective tool for China's economic growth amid poor demand in many other parts of the world. By the same token, fixed asset investment has gained significance as a major engine for the domestic economy.
Judging from recent data released by the National Bureau of Statistics, China's economy is indeed on track to a mild recovery and investment is playing a vital role.
The latest official figures showed that most demand-side indicators in the country saw further pick-ups in November, indicating the continuation of a mild rebound in the real economy, supported by acceleration in domestic investment and the consecutive moderate recovery in the US economy.
In terms of consumption, retail sales registered healthy 14.9 percent YoY growth in November after rising 14.5 percent in October, pointing to a gradual rebounding in consumption in recent months. Retail sales have experienced a noticeable recovery in the past three months, partially supported by the consecutive hikes in wages and subsidy income, especially for rural workers and poor urban households. Looking forward, I expect basic living consumption to maintain relatively steady growth while some durables may encounter a mediocre performance in the short term.
In the first 11 months of 2012, the country's non-farm fixed asset investment increased 20.7 percent, the same as that for the first 10 months. Supported by the loosening in loan and fiscal policies, investment in infrastructure and social services continued to rebound over the last four months.
The huge investment plan for some newly started rail projects (e.g. metro rail) has supported the pick-up in urban transport investment in the past three months. The authority is likely to accelerate the urbanisation process and the building of the social security system over the next few years, and the investment in social services will probably maintain relatively fast growth in the future.
Boosted by the consecutive improvement in housing sales and cash flow for developers, property development investment ended its slowdown trend over the past four months, steadily picking up 15.4 percent in the first 10 months and 16.7 percent in the first 11 months. The floor space started, land area purchased and funding for property investment all saw marked improvement in November, pointing to a possible further rebound in property development investment in the near future.
The November figures indicate that China's economy could continue to see a modest rebound in the near term. Fixed asset investment may perform better in the fourth quarter of 2012 and in the first quarter of 2013 than in the third quarter of 2012, supported by the recovery in the US economy and a further boost from domestic authorities in terms of infrastructure and social service investment.
The Chinese central bank is likely to adopt an easier loan policy and maintain ample liquidity in the interbank market to support moderate increase in social financing as a means of bolstering the investment rebound. Meanwhile, the Ministry of Finance is likely to adopt a relatively proactive fiscal policy while allocating more funds for agriculture, irrigation systems, education, culture, healthcare, social welfare and social housing. However, the performance of the property sector will continue to curb the pace of monetary loosening in the future.
The author is executive director at BOCI Securities. The views expressed here are entirely his own.
(HK Edition 01/09/2013 page2)